interest rate and interest

English Boards General
1

Can somebody confirm for me that the interest rates are per week? 

I can not seem to work out how AS calculates the interest rates. From what i see the term is 2 years but i don't understand how the principal can be so low compared to the interest rate if the term is so short. If the rates are indeed 0.5% (depending on server) per week, that is insanely expensive and ridiculous. It would mean the yearly rate is like 35% or something like that. I am very sure that no airline in the world would be paying 35% interest on their financing. 

thanks

mikk

2

Yes, interest rates are per week.

3

So that means the AS interest rate is around 35% p.a. WTF?????? Why not make it reasonable. 

4

Has it ever occured to you, that AirlineSim (a game) might use a different time scale than the real world (reality)? I do't hear you complain about your airline raking in a two-digit relative profit every week :)

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5

Also, if the interest rate for loans in 35%, what about the interest rate for savings- it should be able 25-30% oer year. I never get any interest from my savings. 

6

If you want your savings to generate a profit, invest them. We've had interest on savings in the past and it turned out to be a bad idea since it basically means that we throw additional money at players who've got plenty of money already. The fundamental issue of capitalism, right there :-D

7

All i suggesting is that 35% interest is stupid. Why not bring it down to real levels like 5-10% or something. It just makes loans for ac ridiculous because the interest that would pay is more than the cost  of a lease. If you don't want to change it just remove the option because new players will just get caught in a trap and normal players are smart enough not to bother. I like the idea of this type of financing if the team will make it a serious option. 

8

All i suggesting is that 35% interest is stupid. Why not bring it down to real levels like 5-10% or something. It just makes loans for ac ridiculous because the interest that would pay is more than the cost  of a lease. If you don't want to change it just remove the option because new players will just get caught in a trap and normal players are smart enough not to bother. I like the idea of this type of financing if the team will make it a serious option. 

The only stupid thing is to try adding up weekly rates into yearly as it doesn't make any sense at all. See what Martin posted about different time scales.

Though there is something wonky with the way AS calculates loans. I've addressed this issue in another thread already, but here goes again:

In AS interest periods match those of the installments.

Real installments usually get paid on a monthly basis but with yearly interest. Into AS, this would transfer into weekly installments and 12-weekly interest payments. A 260 weeks loan aircraft purchase would then resemble a real life financing of 22 periods (years).

9

well my point is that there is no problem with making the payments weekly. But a rate of .5% weekly rate is way way too high. it should be about .01%- that would make the yearly rate about of about 5%. This would mean the interest payed on a loan would be closer to the cost of a lease- it should be cheaper to finance AC by loan than by lease. Every lease I have seen has been more expensive than a loan. But you then have flexibility. 

10 
			41,322,481 AS$
		
			165,954 AS$
		
			1.0%
		
			413,225 AS$
		
			Airbus Industrie A321-200 standard / PK-AFQ

here is an example. the interest per week is 413225. That is insane considering i can lease a 41 million plane for 207000 per week. So only time it would come close to being a good option is when the rate is less than .5% approx and therefore you would be almost making some kind of investment into the ac. I have never seen the rate below .25%.

11

well my point is that there is no problem with making the payments weekly. But a rate of .5% weekly rate is way way too high. it should be about .01%- that would make the yearly rate about of about 5%. This would mean the interest payed on a loan would be closer to the cost of a lease- it should be cheaper to finance AC by loan than by lease. Every lease I have seen has been more expensive than a loan. But you then have flexibility. 

I wouldn't consider a weekly rate of 0.5% too high, as it's matching your leasing rate.

But 0.01% per week equals a yearly 0.5% just btw. Might have been a typo..

I see that it is common believe among AS players that leasing is better than a loan purchase. I've that feeling that some of you only see the short term investment - calculating from week to week so to speak.

How about a comparison:

Let's say we want a 739 (62m.$), bank gives us a tied loan for 0.5%:

Leasing rate: 310,000$

Loan: 62,000,000$, 260 rates

= 238,462$ installment/week

= 155,000$ average interest/week (=40,455,000$ total interest)

Total costs of the loan purchase: 102,455,000$ after 260 weeks (5 years) - but the aircraft is ALL yours and has AT LEAST its scrap value, say 10%. So your actual costs are 96,255,000$.

Total cost of a 5-year lease: 80,000,600$ - but you've got nothing. And then? You might still need the aircraft after 5 years: The loan breaks even not later than 6 years unless you can sell your aircraft for more than scrap.

Sure a loan purchase has to be carefully evaluated as the initial interest (at 0.5%) plus installment is higher than your lease rate.

Btw, I've recently ordered 30 brand new 739 at 0.2% interest. The initial charge is only slightly higher compared to a lease and soon will drop below that of a lease and each airframe - should I really sell it at scrap after 5 years - costs me ~72m$ as opposed to 80m$ for a lease.

But I might operate them for 10 years, bearing slightly higher maint costs and a decreasing image. Costs: still 72m. The lease would have cost me 161m by then.

Of course a different calculation would be a cash bought aircraft after "saving up" for it while operating leased aircraft. But as this depends on your weekly profits it's hard to calculate.

12

ok well this is my point. loan purchases are basically useless in the game. sorry for the typo. but your .2 interest is over 10% yearly. My credit card has less. I can understand that after 5 years of playing you might save 15 milllion on your 737, but you have to consider that the ac will be scrapped for nothing after unless you can find a buyer. I think the rate should be closer to 5% pa which is 0.1% weekly. I think at about this point a loan purchase starts to make sense because you can get some savings after 1-2 years. 

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14

sure i agree that int. rate should be reasonable , this week int. is 3.5% per week , that means 14% per month? anybody please correct me if i am wrong.

15

You are fully correct.
The margin we are able to generate with good airlines are between 30 and up to let say 50%. In real life it is a mid single digit number. The amount of cash you can generate with one aircraft per week roundabout equals the amount of money a very profitable airline generates every 3 months most of the airlines even take more than a year for it. So considering, that you make money 10-50 times faster than in real life does it sound in any way logic to you that the interests are to be paid faster accordingly? Do you see airlines in real life that start with 10 Mio € and operate a fleet of 400 aircraft after one year? Do you know airports where you can build terminals without a limit? Do you always have crews everywhere in the world, so that if you lease an used aircraft there is a crew that gets the aircraft airborne within one hour no matter where the aircraft is located? Do you know any airline that generates profits of one billion per week but still has to pay no taxes. Are there natural destasters in real life or technical issues that cause damage to aircraft? Is there no wind in the real world like it is the case in AS? Is an aircraft fitted with a complete interieur within 1 second in real life?
How long shall I continue so that it appeals to you that AS is a game and not the real world? The function of time is not in a single manner implemented one by one, so how come you expect it to be with interest rates? Was that not well expained beforehand already?

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16

Very complete answer :point_up_2:

17

1st thank u for u reply Colt.
Of course u are fully correct as u said but as u said this is a game which we play to stay a while out of the real world and as a game sure there will be some things that don’t happen in the real world.
Always games must have something to start with and in real life yes we can be 2 or 3 friends who can start a company for 10 millions and even more but here when u buy a plane with credit be sure it will never make u any profits with this int. rate and this is the whole point.
I guess we all are talking to make the game more interesting and again if i am wrong please correct me.

18

I can not share your thoughts. I often operate at the maximum credit range and I always benefit from it. If you want to lease a used A320 for e.g. 2,5 mio AS$ even with an interest rate of 3,5% you only pay 87500 AS$ of interest per week. If you are unable to generate a profit in excess of 87.500 AS$ with an A320 you have a lot more serious problems than the interest rate in this game.
Additionally please keep in mind, that during summer with low AGEX the interst rate drops to around 0,5%. In that case the interst rate for a bought aircraft is even cheaper than the leasing costs for an aircraft.
But as we seem to have different ways of understanding the interest rate it is our right to play the way we prefer to. Nobody forces you to take a credit. If you are not able to benefit from it it would be wise to not do so and simply safe money before investing.

19

I forgot to say that i am new here and i am discovering the game so i still have to gain a lot of experience and i am sure that i enjoy this game more and more every day.

20

Has there been a bug since the latest update?
Instead of the usual 1-1.5% p.w. interest rate, now it is 6-8% p.w. This is for a ‘normal’ loan, not for an aircraft buy. IMHO that is ridiculous high.